Gas cartel agrees to pump but at what price?

Energy producers on Australia’s east coast may escape the threat of government intervention after signalling the extension of a deal to offer uncontracted gas for domestic use before export, and agreeing to make gas available at peak demand periods for the power grid.

Following meetings in Canberra yesterday, gas players are expected to recommit to the Australian domestic gas security mechanism, which gives the government power to limit gas exports if it anticipates a domestic shortfall the following year.

Further talks will now be held with the industry to develop a heads of agreement before a recommendation is made to Prime Minister Scott Morrison later this month.

It’s all so very vague. The export net-back price which has formerly represented an ephemeral price target is currently around $11-12Gj. The east coast price today around $9Gj.

So what is the mechanism agreeing to? A price rise of 25%? Or is it going to be locked at $9Gj?

Even so, these prices are still very high versus history.

Let’s just formalise this thing at a price that can be met permanently. I favour $6Gj.

It’s clear that the cartel knows its social licence to operate is tearing. It will negotiate if pushed to.